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Condominium lawyer Evan Holt alleges York Condominium Corp. No. 25 invested $500,000 in a cryptocurrency exchange called 'Pink Piggy Investment Group Inc.'DADO RUVIC/Reuters

An allegation that a Toronto townhouse complex violated Ontario’s Condominium Act by investing at least $500,000 in a cryptocurrency exchange called Pink Piggy Investment Group is highlighting gaps in provincial protections for condo owners.

“One of the frequently cited statements about the condominium industry is that there’s no condominium police,” said Bradly Chaplick, a condo law expert with Horlick Levitt Di Lella LLP, and he stresses that’s particularly true when it comes to allegations of financial mismanagement.

An example of the weaknesses in the system can be seen in the case of York Condominium Corp. No. 25, which governs a townhouse complex in Ontario Premier Doug Ford’s own riding of Etobicoke North. On Sept. 1, condominium lawyer Evan Holt sent a letter to residents of the complex alleging the condominium corporation had invested $500,000 in a cryptocurrency exchange called “Pink Piggy Investment Group Inc.”

“When it came across my desk I was shocked,” Mr. Holt said in an interview with The Globe. “It’s really unfortunate that in a building like this it’s the owners that will ultimately suffer – or have the potential to suffer – if this money is gone, or not returned.”

Mr. Holt describes a “guaranteed investment certificate” issued Nov. 15, 2022, but alleges that the transaction violates section 115 of the Condominium Act, 1998 that restricts condo reserve funds from being invested in anything that’s not guaranteed by the federal or provincial governments, is covered by the Canada Deposit Insurance Corporation or the Financial Services Regulatory Authority of Ontario, or is a security of a prescribed class.

The Globe and Mr. Holt could find no record of Pink Piggy operating as a licensed or insured financial institution, and on Feb. 7, 2023, the Ontario Securities Commission issued a bulletin that warned the public that Pink Piggy Investment Group Inc. (also known as HubKoin) is “not registered to deal or advise in securities in Ontario.”

“Reserve funds are not to be invested in the stock market, and certainly not in cryptocurrency or other similarly risky assets,” said Mr. Chaplick. According to him anyone – directors, management, legal advisers – at a condo corporation that knowingly contravened the act could face sanctions, but only if other owners complain.

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But exactly who to complain to in this situation isn’t clear.

The Condominium Act was updated in 2017 to tighten regulations on an industry that had operated without much scrutiny for decades. Two updated Acts created two new authorities: the Condominium Authority of Ontario (CAO) and the Condominium Management Regulatory Authority of Ontario (CMRAO).

The CAO registers and trains board directors but limits its regulations mainly to interpersonal disputes, providing a tribunal to keep so-called, “pets, parking and noise” cases out of the civil courts. The CMRAO has responsibility for the licensing and ethical standards of the condo managers, who are typically hired to run the day-to-day business of the province’s more than 11,000 condo corporations.

But neither agency is empowered to deal with a board and/or condo manager violating the Act to spend reserve funds on restricted investments. For cases such as this, a private citizen would most likely need to make an application to the Superior Court of Justice to enforce the Act.

The Ministry of Consumer and Business Services Act does allow for the appointment of a special “director” to prosecute violations of the Condo Act, punishable by a fine of up to $25,000 for an individual and $100,000 for a corporation convicted. But this section of the law has never been used.

“No prosecutions of an alleged contravention of the Condo Act described under section 137 have been initiated by the ministry,” said Jeffrey Stinson, spokesperson for the Ministry of Public and Business Service Delivery.

The situation at YCC No. 25 is complicated because the board has been riven by disputes for years, with court records of civil litigation going back more than a decade. One current case brought in 2021 alleges election malfeasance, but its next court date isn’t scheduled until 2024. Even Mr. Holt is one of two condominium lawyers who say they are acting for the corporation, with rival slates of board directors claiming to be the legitimate authorities.

Norbert (Bert) Berger is the president of L & H Property Management Inc. and has been the condo manager for YCC 25 since 2015 (originally for a different management company). He said Mr. Holt’s letter was “completely false” and denied that he had invested the funds: “I don’t have access to the funds, the corporation’s board of directors did.”

In a copy of the Pink Piggy certificate attached to Mr. Holt’s letter Mr. Berger’s name and signature appear as the “chairman of the board” signing on behalf of Pink Piggy. The contact information on the document also includes an e-mail for Mr. Berger and the phone number for L & H’s office.

Mr. Berger declined to answer questions about who is behind Pink Piggy or whether he had any financial relationship with the company, but said he had been in contact with its principals.

“I know for a fact that the people that they dealt with will not be stiffing them for anything,” said Mr. Berger, who said Pink Piggy offered 12-per-cent interest on the promissory note that matures in November, 2023. “I contacted Pink Piggy … [YCC 25] will receive their money.”

He acknowledged the payment to Pink Piggy happened but suggested there had been “no harm, no foul.”

“So there’s a violation of the Act? Let’s just assume that. You say it’s a violation of the Act. I’ve had other people look at it and they don’t necessarily agree,” Mr. Berger said. “Just because it says something in the Act doesn’t mean that the Act can’t be changed or interpreted in a different way.”

Mr. Chaplick said the ethical duty for a condo manager faced with a board that planned to violate the Act would be to inform it of the dangers and consider resigning if they are ignored.

“If you are a manager knowingly encouraging a board to participate in a crypto investment pool with reserve funds, that to me is right up there with anything else that a manager could do to lose their license, like bang one-shot,” said Mr. Chaplick. “That is not within the bounds of anything reasonable that would be a reprimand. … That’s on the same level as just taking the money. It’s as bad as it gets.”

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